Sebi promises speedier actions with greater powers

Pitching for a major overhaul of the powers it has got to deal with market manipulators, Securities and Exchange Board of India says there is an urgent need to carry out these changes to ensure speedier probes and fast-track prosecution of the culprits.

The capital markets watchdog has asked the government to empower it to carry out search and seizure operations, to attach properties and to ask for information and records for all relevant entities.

Besides, Sebi has asked the government to streamline the procedures involved in execution of its existing powers.

"At times it has been difficult for us in many cases to move forward in absence of these powers.

"Also, there are long procedures involved in executing many powers that we already have and we want those processes to be streamlined," Sebi Chairman U K Sinha said.

"The expectation is that once we get these powers, then we would be able to move really fast on the investigations that we undertake, and on the actions we need to take against the culprits and in bringing to book all the manipulators and others defrauding the investors," Sinha said.

Noting that the Securities and Exchange Board of India has come a long way since it was set up 25 years ago in 1988 as an independent regulator, its eighth chairman said that the time has come for an overhaul of the regulations governing Sebi's powers and other functions.

"Now we have found that there are certain lacunae in the regulations and there are certain areas where more clarity is required.

"There are some powers that we already have, but the procedures to execute those powers are very difficult," Sinha told PTI in an interview.

"We don't have the direct powers to recover the dues, the powers to attach properties etc.

"Many such powers are already there with some other regulators and the agencies such as the Competition Commission of India and the tax departments, among others," the Sebi chief said.

"Another area where we face difficulties is while seeking information or records from various entities in the process of our investigations.

"What happens is that these entities tell us that they do not fall under Sebi jurisdiction and, therefore, they are not required to provide information to us.

"We face lots of difficulties in getting these details.

There is also the issue of call data records that we need to establish that two parties have been talking to each other and could be related entities.

"We also do not have search and seizure powers, which is there with some other agencies," he added.

Experts say that the lack of these powers was felt in a big way during some of the recent cases, including the high profile Sahara case, where Sebi could pass attachment orders only after a Supreme Court directive.

Besides, hundreds of entities have managed to avoid paying penalties imposed by Sebi, as the regulator does not have any direct powers to recover these penalties.

"The last time major amendments were made to the Sebi Act was in 2002, when several important powers were given to Sebi," Sinha said.

The powers given to Sebi at that time included authority to pass interim orders, to investigate and to have an enquiry and then to pass a final order which can be a cease and desist order or a monetary penalty (of up to Rs 25 crore or Rs 250 million).

Besides, Sebi was given powers in 2002 to seek information and records from banks and many other authorities, as also the powers for inspection of the books of accounts of listed companies.

With an aim to provide stronger powers to Sebi for taking on perpetrators of ponzi schemes and other fraudulent activities, the government earlier this month proposed to arm the market watchdog with direct powers to carry out search and seizure operations and for attachment of assets.

Besides, it has also been proposed to provide Sebi with powers to seek information, such as telephone call data records, from any persons or entities in respect to any securities transaction being probed by it, sources said.

However, the proposals will need amendments in the Sebi Act and other relevant regulations and would, therefore, require clearance from the Union Cabinet and thereafter would go to Parliament.

The Department of Economic Affairs has also sought views on these proposals from other departments in the Finance Ministry, as also the Corporate Affairs, Home, Law and Telecom ministries, the Reserve Bank of India, Planning Commission and Prime Minister's Office.

After getting the Cabinet's approval, the government plans to introduce the Securities Laws (Amendment) Bill, 2013 in Parliament to carry out the proposed changes for grant of stronger powers to Sebi, sources have said.

With regard to the regulation of Collective Investment Schemes, the proposal calls for Sebi being empowered to deal with all kinds of investment schemes involving pooling of funds totalling Rs 100 crore (Rs 1 billion) or more.

Also, any investment scheme floated by a 'person' and not only a 'company', has been proposed to be brought under Sebi's jurisdiction for CIS activities.

The proposed amendment seeks to bring all kinds of ponzi schemes, which are thriving in various semi urban and rural areas at the expense of gullible investors, are brought under Sebi's oversight, which itself would be made much more effective to safeguard investors from being defrauded.

Besides, the government has also proposed to provide Sebi with direct powers to conduct search and seizure with authorisation from its Chairman. Currently, Sebi can conduct search and seizure only after approval from the Chief Metropolitan Magistrate, but this provision is often seen to delay proceedings and hamper the confidential nature of probe.